Private Health Services Plans for Incorporated Businesses
- Though shareholders of a corporation are eligible to receive benefits through a PHSP they must do so in their capacity as an employee, not as a shareholder. This means the the shareholder must prove actively involved in the company, and recieve T4 income.
- The PHSP benefits for the shareholder must be reasonable; meaning they hold consistent with what would be offered to an arm's length employee performing the same company duties.
- The size of the corporation will affect how each employee, including shareholders, will be classified.
- All employees in the same employee class must receive the same PHSP limits.
- Limits can be set on types of benefits: Ex. Dental benefits can be set at a specified amount per year.
- Limits can be set for each individually covered item within the supplemental health
- Limits can be applied to families as a whole or applied to each individual family member.
- The PHSP must, in most cases, be administered through a recognized third party administrator to be acknowledged by the CRA as qualified for tax deduction.
For additional information on PHSP structure visit the following CRA links or see other related pages available on the Canada Revenue Agency website. Bear in mind that the Income Tax Act is constantly changing, and thus it is in your best interest to discuss your PHSP structure with a qualified third party administrator or broker
- The meaning of 'private health services plan' (1988 and subsequent taxation years): IT339R2
- Medical expense and disability tax credits and attendant care expense deduction: IT519R2-CONSOLID
- Flexible employee benefit programs: IT529
- Health and welfare trusts for employees: IT85R2